Telkom momentum stalls
Telkom has seen its share price stall in recent months as the group seeks to stabilize its earnings in 2014 and in the medium term.
On Wednesday (11 December) the group closed at R27.50 on the JSE, a level it has more or less traded at since October.
Over the past year, Telkom’s shares have increased nearly 80%, up from around R15 in December, and an all time worst figure of R11.34 recorded in May.
The group peaked at R29.44 in mid October, but has since fallen back slightly following the suspension of CFO Jacques Schindehutte amid an ongoing investigation, and the announcement of a marginal increase (0.3%) in operating revenue for the six months ended September.
Sipho Maseko, Group CEO at Telkom also admitted that the Telkom Mobile business is going through “a very difficult time”, and is in discussions with parties over future operations.
Looking ahead, Maseko said that the telco will look to re-instate its dividend policy in the financial year 2015, having last delivered a dividend in 2011.
An analyst at RMB Private Bank told BusinessTech that the reality is that Telkom’s mobile “will cost them a lot for a long time”. He opined that some sort of switch in strategy (partnership, sale or otherwise) wouldn’t be the worst thing.
From an investors point of view, RMB said that while Telkom has appeared to have started a turnaround process, it is only with management and the board. “I don’t think a three year financial turnaround is enough to get excited about the share yet,” the analyst said.
“Stabilization is a very important word for us. In the last few years, our revenues have actually been declining, so we are looking to move from a period of decline, to stabilizing,” Maseko said at the group’s headquarters in Pretoria.
“For the financial year of 2015, we are looking to lay the right platform in order for us to grow, so part stabilisation, part growth.”
“It’s a big ship”, Maseko said of Telkom. “We want to make sure that once we turn it, we turn it properly.”
He said that, from 2016, the group would look to grow, adding that over the next three years the group would need to see growth in its top line in order to meet its dividend ambitions.
“It probably won’t be at high yields,” Maseko admitted.
| F2014 | F2015 | F2016 | |
| Revenue | Stabilise | Stabilise to Grow | Grow |
| EBITDA margin | Increase 1%-2% | Increase 1%-2% | Increase 1%-2% |
| Capex to revenue | 18% -21% | 14% -17% | 14% -17% |
| Net debt to EBITDA | ≤ 1 | ≤ 1 | ≤ 1 |
| Reinstate dividend | Reinstated | Reinstated |
“I do think the current management and board have given some credibility back to Telkom, now the next steps need to be taken and unfortunately that is more than just taking some costs out of the system,” the RMB analyst said.
“A strategy that shows where the business wants to be in 5-10 years is what I think investors (along with some delivery) want before investing for the long-term,” he added.
More news on Telkom
Telkom in talks over mobile arm
Telkom in talks over mobile arm
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